As the Nigerian naira experiences a sharp depreciation against major currencies, financial analysts are predicting that the Monetary Policy Committee (MPC) will opt for another interest rate hike to address the country’s economic challenges.

The recent slump in the naira, coupled with a 28-year high inflation rate, has raised concerns among economists, prompting expectations of further tightening measures.

Since mid-April, the naira has witnessed a significant decline, falling by 28% against the US dollar over the past four weeks.

This rapid depreciation has been exacerbated by President Bola Tinubu’s decision to relax foreign-exchange controls last June.

In response to the economic turmoil, the MPC raised interest rates by 6 percentage points in the first quarter, bringing the benchmark rate to 24.75%.

However, with inflation soaring to 33.7% last month—well above the central bank’s target range of 9%—analysts believe that additional rate hikes may be necessary to curb rising prices and stabilize the currency.

Giulia Pellegrin, a senior portfolio manager at Allianz Global Investors, highlighted the need for proactive measures, stating, “The committee will likely be watching recent currency volatility and may decide more action is needed.”

She emphasized the importance of tightening monetary policy to restore investor confidence and ensure price stability.

Yvonne Mhango, an economist at Bloomberg Africa, echoed similar sentiments, noting that the naira’s depreciation necessitates “additional and sizeable rate hikes.”

Mhango emphasized the significance of maintaining positive real interest rates to combat inflationary pressures effectively.

Investors are eagerly awaiting the MPC’s decision, with many expecting another interest rate increase at the upcoming meeting on May 21.

Ayodeji Dawodu, director of fixed income at BancTrust & Co., stressed the importance of transparency and intervention in the currency market to restore stability.

“Investors also want Cardoso to announce more liquidity-tightening measures and introduce greater transparency in the currency market,” Dawodu remarked.

Despite recent declines in liquid reserves, analysts remain hopeful that decisive action from the central bank will help alleviate concerns about the quality of reserves and bolster confidence in the economy.

As Nigeria navigates through turbulent economic waters, all eyes are on the MPC’s decision and its potential implications for the country’s financial landscape.

President Bola Tinubu has given the green light for a comprehensive N3.3 trillion rescue package.

This ambitious initiative seeks to tackle the country’s mounting power sector debts, which have long hindered the efficiency and reliability of electricity supply across the nation.

The unveiling of this rescue package represents a pivotal moment in Nigeria’s quest for a sustainable energy future. With power outages being a recurring nightmare for both businesses and households, the need for decisive action has never been more urgent.

At the heart of the rescue package are measures aimed at settling the staggering debts accumulated within the power sector. President Tinubu has approved a phased approach to debt repayment, encompassing cash injections and promissory notes.

This strategic allocation of funds aims to provide immediate relief to power-generating companies (Gencos) and gas suppliers, while also ensuring long-term financial stability within the sector.

Chief Adebayo Adelabu, the Minister of Power, revealed details of the rescue package at the 8th Africa Energy Marketplace held in Abuja.

Speaking at the event themed, “Towards Nigeria’s Sustainable Energy Future,” Adelabu emphasized the government’s commitment to eliminating bottlenecks and fostering policy coherence within the power sector.

One of the key highlights of the rescue package is the allocation of funds from the Gas Stabilisation Fund to settle outstanding debts owed to gas suppliers.

This critical step not only addresses the immediate liquidity concerns of gas companies but also paves the way for enhanced cooperation between gas suppliers and power generators.

Furthermore, the rescue package includes provisions for addressing the legacy debts owed to power-generating companies.

By utilizing future royalties and income streams from the gas sub-sector, the government aims to provide a sustainable solution that incentivizes investment in power generation capacity.

The announcement of the N3.3 trillion rescue package comes amidst ongoing efforts to revitalize Nigeria’s power sector.

Recent initiatives, including tariff adjustments and regulatory reforms, underscore the government’s determination to overcome longstanding challenges and enhance the sector’s effectiveness.

However, challenges persist, as highlighted by Barth Nnaji, a former Minister of Power, who emphasized the need for a robust transmission network to support increased power generation.

Nnaji’s advocacy for a super grid underscores the importance of infrastructure development in ensuring the reliability and stability of Nigeria’s power supply.

In light of these developments, stakeholders have welcomed the unveiling of the N3.3 trillion rescue package as a decisive step towards transforming Nigeria’s power sector.

Nigeria is grappling with soaring inflation as data from the statistics agency revealed that the country’s headline inflation surged to a new 28-year high in April.

The consumer price index, which measures the inflation rate, rose to 33.69% year-on-year, up from 33.20% in March.

This surge in inflation comes amid a series of economic challenges, including subsidy cuts on petrol and electricity and twice devaluing the local naira currency by the administration of President Bola Tinubu.

The sharp rise in inflation has been a pressing concern for policymakers, leading the central bank to take measures to address the growing price pressures.

The central bank has raised interest rates twice this year, including its largest hike in around 17 years, in an attempt to contain inflationary pressures.

Governor of the Central Bank of Nigeria has indicated that interest rates will remain high for as long as necessary to bring down inflation.

The bank is set to hold another rate-setting meeting next week to review its policy stance.

A report by the National Bureau of Statistics highlighted that the food and non-alcoholic beverages category continued to be the biggest contributor to inflation in April.

Food inflation, which accounts for the bulk of the inflation basket, rose to 40.53% in annual terms, up from 40.01% in March.

In response to the economic challenges posed by soaring inflation, President Tinubu’s administration has announced a salary hike of up to 35% for civil servants to ease the pressure on government workers.

Also, to support vulnerable households, the government has restarted a direct cash transfer program and distributed at least 42,000 tons of grains such as corn and millet.

The rising inflation rate presents significant challenges for Nigeria’s economy, impacting the purchasing power of consumers and adding strains to household budgets.

As the government continues to grapple with inflationary pressures, policymakers are faced with the task of implementing measures to stabilize prices and mitigate the adverse effects on the economy and livelihoods of citizens.